Case Study on How Insurance Would Have Helped Unfortunate Man

I read in the papers about a very unfortunate case about a man who accidentally slipped and fell on a walkway wet from rainy weather, causing him to be paralysed from the neck down.

He is now suing the town council for negligence and seeking compensation for medical expenses, loss of earnings, transport costs as well as pain and suffering.

Here is an excerpt of the news article:

Sembawang resident Aw Kian Chow was walking back to his flat in Block 415, Sembawang Drive on a wet evening in August 2008 when he took a tumble on a sloping ramp near his block.

He fractured his spine and became paralysed from the neck down.

Now, three years down the road, the 46-year-old father of two young children is still bedridden and cannot speak; he also needs life support equipment, regular hospital care and caregivers to turn him on his bed every three hours to drain out mucus and other fluids.

His condition has thus precluded all prospects of holding down a job, and made his wife, a bank officer in her 30s, the family’s sole breadwinner.

The family has since moved out of the five-room flat in Sembawang into a smaller flat elsewhere so the family can meet his ongoing, hefty medical bills.

Read Full Article

The article does not make any mention if Mr. Aw was covered by insurance or company benefits. However, this is how a proper insurance portfolio would have played out to assist someone in this situation.

A proper insurance portfolio that would help

A hospitalisation policy integrated with his basic Medishield coverage would have taken care of most of his medical expenses as well as on-going hospitalisation expenses he is currently incurring. To hedge against such long-term hospitalisation, the policy should ideally have a high yearly limit.

A disability income insurance will replace his income to a certain extent. One should insure as much of his monthly salary as possible, which is limited to 75% by insurers (there are people who do not want to buy insurance, and there are limits to a type of insurance an insurer wants to sell!). To protect oneself from the staggering financial impact of being unable to work for a very long time – perhaps even the rest of one’s life – one should aim for a suitably long coverage period as well as an escalation benefit to cope with inflation. The replacement income will be invaluable in ensuring that existing financial commitments such as bills, mortgage payments, childrens’ expenses etc. are taken care of.

A life policy covering for Total & Permanent Disability and/or Critical Illnesses would pay out in severe paraylsis such as this case. The lump sum of money can be used to cover expenses that a hospitalisation policy does not take care of. This include a higher cost of living due to one’s impairment, such as the costs involved in hiring caretakers and renovating one’s home to be wheelchair-friendly. This also gives one a safety net for comfort beyond the replacement income he is receiving from the disability income insurance. With a sum of money, one’s spouse may even opt to stop working for a while in order to spend time with the disabled partner. Of course, one can also use this amount of money to fuel a potentially expensive legal battle to sue an entity for damages arising from pain and suffering.

Proper insurance planning is critical

This may sound like a lot of insurance, but the truth of the matter is that a proper insurance portfolio like this can be very cost-effective if the correct solutions are employed. The unfortunate thing is that most people do not buy insurance, buy too little, or just spend a lot of money on all kinds of overpriced policies that do not give meaningful coverage and feel that they are safe because they “bought insurance”.

Hopefully Mr. Aw and his family can get a resolution to their predicament.

Thumbs up to keep me writing more!

2 responses.

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  • Reply
    Anonymous said 2315 days ago:

    What would the proposed coverage typically cost? What kind of protection would it typically offer?

    You make mention of cost-effective portfolio.
    It’ll probably make more sense to layman like me if you could articulate some figure.

    Thanks.

    • Reply
      Seth said 2315 days ago:

      Have briefly described the kind of protection offered in the article (reimbursement of medical bills, income replacement, money for higher cost of living etc).

      Cost-efficiency is a ratio of cost versus benefit. Figures alone do not tell you anything about value. A people may only be able to afford $20+ per month for the time being, so I’ll piece together a cost-effective (and interim) portfolio for him within his budget. Others have high salaries and need greater coverage and so the absolute cost will be higher (with accordingly better coverage).

      Moreover, two people with the same financial profile can both spend exactly $X on insurance. One may have a cost-effective portfolio and be well insured, while the other may have bought rubbish policies and is not covered properly. I have clients paying more than 10 times of $X with their previous agents and still not meaningfully insured. Figure X alone does not represent cost-efficiency.

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